Wednesday, March 30, 2011

These last weekshave been, if anything, exciting times for anybody interested in the mechanics of international news cycles. While the earthquake, tsunami and nuclear meltdown in Japan were continuing to unfold, the new war in Libya seemed to dominate the headlines for a few days. Now, with more bad news from Japan the topic seems to be back on the agenda.

It is interesting to see how many of the debates of the 1980s on nuclear power are slowly coming back to the fore. Furthermore, the same irrationalities in dealing with risks are coming back on to the agenda. Since nuclear risks mainly exist in the individual’s perception, the debate over the last two weeks has been a splendid laboratory in understanding the social construction processes of reality.

One of the more surprising comments to read came from long-time environmental activist and commentator George Monbiot. In his regular column in The Guardian he shocked many with a relatively straightforward plea in favour of atomic energy. Mostly on the grounds of it being more climate friendly than coal. While his arguments are worth listening to it was surprising how he made his case: even taking the Chernobyl disaster into account, he argued that far fewer people died from nuclear power so far than will potentially do so in the future from global warming.

The interesting point here is not so much this weighing-against-each-other of life, disease and hazards but the fact that in the second decade of the new millennium, one crucial difference to the debate in the 1980s is visible: the spectre of global warming. The way we evaluate and compare these risks largely depends on our subjective evaluation. Monbiot in the British Isles probably has a very different recollection of the Chernobyl disaster than, say, people in Continental or Eastern Europe.

Arguably the country where the Japan disaster has caused the biggest ripples for business and politics is Germany. Not only did Physics-PhD and staunch nuclear supporter Angela Merkel announce immediately a 180-degree turnaround in the nation’s policy on nuclear energy. This was enough to anger large parts of the German business community. It did not help that her Economics minister Rainer Brüderle told industry leaders in a meeting that this was just ‘electoral tactics’ – a comment promptly leaked to the public and leading to his resignation from his role in the Liberal Party FDP.

The biggest winners of the debate in Germany currently are – to no surprise – the Greens. For the first time in history, they have scored enough votes to gain power in one of the most important states (Baden-Württemberg) in the southwest of Germany. The Green party now for the first time leads a state government and Germany has its first Green state premier. And this in one of the most conservative and industrious states of Germany, home to many crown jewels of German business, including Mercedes and Porsche. According to many commentators it was mostly the nuclear topic which swung voters to turn out for the Greens.

Funny enough, our own comments on this blog attracted some interesting attention from the media. We gave a couple of interviews recently – interestingly enough mostly for Chinese and Indian TV stations. Click on the clip (for Omni 2, a Canadian Chinese language program) – it is curious to see what journalists find worth quoting. It was probably the most trivial and banal thing we said in an interview which went on for more than 30 minutes. Which brings us back to news cycles. What a funny world we live in...

Monday, March 21, 2011

With global attention focusing on the rapid escalation of conflict in Libya and desperate efforts to contain the nuclear threat in Japan, it is easy for the ongoing humanitarian crisis in the wake of the Japanese earthquake and tsunami to recede from view. But with reports of the death toll now edging past 18,000, and nearly 500,000 people still living in shelters, the country is still certainly in dire need of support and assistance - and will be for some time to come. A report from the World Bank has estimated that the damage inflicted by the disaster will cost somewhere between $123bn and $235bn, the equivalent of some 2.5% to 4% of the country's GDP. Recovery could take up to 5 years, the report suggests.

Business in Japan has been significantly damaged by the quake and its aftermath. The automotive and electronics supply chain, in particular, appear to have been severely disrupted, leading to delays and shutdowns in production. But as previous disasters have shown, business can also play a major role in rescue and relief operations, as well as in subsequent rebuilding efforts. Wal-Mart famously upstaged the US government in responding effectively to the floods in New Orleans after Hurricane Katrina in 2005. In contrast, after the devastating 2008 cyclone in Burma, international companies were slow to offer assistance. Last year's Haitian earthquake generated a lot of corporate donations, as well as a fair deal of controversy around the role of companies in economic redevelopment and rebuilding projects.

Corporate involvement in disaster relief in Japan has yet to hit the headlines in any major way, primarily, as far as we can tell, because companies have been rather conservative in their responses. That's not to say that companies haven't helped raise a lot of money for the cause, because they have. According to the US Chamber of Commerce's, Global Aid Tracker, which does a pretty impressive job of keeping tabs on such things, global corporate assistance for the Japan crisis has now exceeded $158 million. This includes 100m Yen (about US $1.2m) each from companies such as Bayer, BP, Hyundai, LG, Nikon, and others. Even higher sums - up to 5 times as much in fact - have been committed by the likes of Canon, Citigroup, Dow, GE, Mitsubishi, Nintendo, Sony, and Wal-Mart. As you can see, it's not just Japanese companies either, but global companies, especially those operating in Japan doing the giving. The Japanese Red Cross, however, appears to be the most favoured recipient.

Some companies have linked up their corporate donations with employee giving, often by matching employee donations, as a way of engaging workers in CSR initiatives. An interesting development here has been the tie-up between the CSR services company AngelPoints and Network for Good to provide a free on-line giving platform to the firm's clients. As the firm's press release puts it:

From now until the end of April, two million employees from companies such as Newell-Rubbermaid and Sterling Savings Bank will have access to a centralized online donation platform that will facilitate the immediate transfer of funds to organizations in Japan that need it most.

In fact, the on-line world has probably seen some of the more innovative responses to the disaster from the corporate community. Whilst some, such as iTunes and LivingSocial have simply enabled users to readily make donations through their sites, various Japanese gaming companies have developed cause-related game tie-ins to engage their users in contributing to relief efforts. The gaming demographic is notoriously difficult to enlist in social programmes, so it is certainly a positive sign that gaming companies are using their core products to reach out in this way. Zinga, the US company behind the hugely popular Facebook games, Farmville and Mafia Wars has followed up its Haiti giving initiative with a Farmville in-app donation vehicle which enables users to donate by buying virtual goods within the game - in this case, a daikon crop. Launched within 24 hrs of the disaster, online gamers reportedly went on to help Zinga contribute more than US $1m in just a few days. For a company with a tagline of 'connecting the world through games' (and already drawing fire for its addictive effect on young players), Zinga's ability to use social media to connect gamers around the world with major social problems is a surefire winner.

Elsewhere, there has been a disappointing lack of innovation among the corporate community in the Japan disaster relief. Providing money and in-kind goods is one thing, but what really can make humanitarian aid efforts stand out are when they leverage core corporate capabilities. Japanese manufacturing companies, with their decades of experience in just-in-time management and lean manufacturing practices, could be deploying their logistics and supply chain prowess to relief efforts. Law firms and financial services companies could be putting their skills towards helping displaced families, many of which lack earthquake insurance, sort out the legal and financial mess they have found themselves in rather than simply donating cash. The list goes on. Short-term charity is fine as far as it goes, but companies should know that a more strategic approach to corporate responsibility has the potential to add considerably more value both to the stricken Japanese people and to themselves.

Sunday, March 13, 2011

This weekend is another proof of the absurdities of short-lived international news cycles. While the revolution in Northern Africa/Libya is still ongoing but features rather low on news sites, and academic scandals are forgotten totally - the earthquake plus tsunami in Japan has swept most other stories from the screen.

Fair enough. What we have seen from Japan has been harrowing. Crane & Matten have taught and worked with many Japanese students over the years and our thoughts have been with them in recent days. We hope that they and their families are all fine and wish them our heartfelt best. Let us know how things are going!

One facet of the catastrophe though moves it clearly to a next level of watching some apocalyptic science fiction movie: We are talking about the ongoing news story about the explosion and potential meltdown of so far four nuclear reactors (by the time we write this). The nuclear beast is rearing its ugly head again.

We remember when the Chernobyl accident happened in 1986 many western commentators put much of the blame on the allegation that the Soviets had old technology, they did not run things properly and anyway, it just went to show that communists are not good at anything. Now – this is Japan, one of the high tech capitalist nations of the world. Sure, this was triggered by one of the top 5 earthquakes in history. But in Japan, earthquakes are not what extreme snowstorms are in Britain. The Kobe earthquake which claimed six and a half thousand lives happened just 16 years ago.

The event hits at a time when nuclear power was experiencing a second spring in many industrial countries. As a carbon-free source of energy it seems a good alternative to fossil fuels, which are considered key drivers of climate change. Many countries that have been shying away from nuclear after Chernobyl or the Harrisburg incident in the US are now reconsidering their options. Finland has just built some new reactors, Obama has issued fresh permits for uranium mining in Colorado, even Germany (which ruled it out 10 years ago) is prolonging the life-cycles of its existing plants – just to name a few examples.

While many experts in environmental politics considered the debate on nuclear power dead by the beginning of the last decade, it is amazing to see that it has come back. The disaster unfolding as we speak in Japan elucidates exactly why a rational discourse on nuclear power is so difficult.

The main threats of this technology are consequences which are mostly uncertain or even unknown. In other words, these ‘risks’ – apart from a few accidents we have seen – entail consequences which humans normally will find difficult to imagine, much less to calculate. The speculations on TV by ‘experts’ about what happens to Japan in case this really turns bad clearly demonstrates this. While the probability of nuclear incidents historically has been very low, the potential impact is without boundaries. Geographical boundaries, but also temporal ones: how long will people suffer from the fallouts we have already seen this weekend? Not to think about the worst case scenario...

Nuclear risks are unique. Their probability – from all we know – is rather low and since we have so few incidents, they are hardly calculable (unlike your car insurance, where we have ample data to establish probabilities). At the same time, the potential impact or damage of a nuclear accident tends toward infinity. Thus the normal way of assessing risks is rather difficult: a probability next to zero times a damage next to infinity – what exactly does this risk look like?

It is here where irrationality and ideology often fill a gap in the debate, as rational concepts fail to analyze the problem. This is exacerbated by the problem that nuclear risks are now ‘compared’ to the risks of global warming – which again is a risk that is difficult to calculate. Not much mathematical information exists on how likely the increase in temperature is. And even less information is available on how hard climate change will hit, where, when, who, and which parts of the world. So, finding trade-offs between nuclear risks and climate change risks is next to impossible – proving another characteristic of those modern risks: their ‘incommensurability’, meaning, it is impossible to ‘compare’ and weigh these risks against each other.

So what hope is there after this wake-up call about the fact that nuclear is not the silver bullet against climate change? We have to accept that climate change is real (even though we can say with little certainty how exactly it will hit us) and nuclear power is not a safe option either. We would argue that much more effort, resources and political will has to be directed toward alternative sources of energy: energy saving (by many accounts our largest resource), renewables, and lifestyle changes. If the disaster in Japan would trigger that debate there is at least a glimmer of hope coming out of this unfolding catastrophe.

Monday, March 7, 2011

The London School of Economics has been embroiled in a major controversy regarding its relationship with the under-siege Libyan regime, and most particularly Saif Al-Islam Gaddafi, the son of the Libyan leader. Last week saw the shock resignation of the LSE's Director, Sir Howard Davies, as a direct result of the crisis - a major scalp for those arguing that the university had put commercial interests before its academic integrity. But the case is far from clear cut.

So what has got the internationally acclaimed university into such hot water? The critical issue here is the receipt of money from sources attached to the Libyan regime, including a donation of £1.5m from a charitable foundation run by Gaddafi's son, and £2.2m paid to the university to train Libyan officials. To complicate matters, Davies also acted as an advisor to the Libyan sovereign wealth fund. Oh, and Saif Al-Islam Gaddafi is an alumnus of LSE, whose PhD, awarded in 2008, is now the subject of a heated plagiarism scandal. As with the recent case of Karl-Theodor zu Guttenberg, the German Defence Secretary that we covered two weeks ago, an on-line campaign to identify and make public alleged plagiarism offences in Gaddafi’s doctoral thesis has gathered considerable momentum, forcing the university to instigate an academic offences investigation. Who knew that PhD plagiarism would be such an on-trend internet phenomenon in the first months of 2011?

Davies' resignation from his role as Director of LSE could not have been envisaged only weeks ago. But with Gaddafi senior and his Libyan regime now widely condemned after the dictator’s brutal response to the public uprising in the country, (and Gaddafi junior very much defending his father’s position) those with links to Gaddafi have also increasingly come under fire. And it’s not only pop stars like Usher, Beyonce, and Nelly Furtado. When a university such as LSE is linked in such a direct way to human rights abuses, it is no surprise that its reputation will come under fire. As Davies remarked about his resignation:

"I advised the [LSE] council that it was reasonable to accept the money and that has turned out to be a mistake," he said. "There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance."

Well yes, that’s probably so. University leaders do have a responsibility for upholding the reputations of their institutions. And despite the recent charm offensive from Libya, it certainly did continue to pose a significant reputational risk. But then with hindsight that is, of course, easy to say. The UK government was certainly strongly encouraging the LSE to engage more with the country and there’s definitely a strong case to be made that bringing the educational heft of the LSE to the Libyan regime might well have made a contribution to enhancing openness and democracy in ways that only a liberal education can. This side of the argument was persuasively presented by our former colleague, Darryn Mitussis, writing in the Letters pages of the The Guardian newspaper:

“Introducing the children of autocracy to the best traditions of critical, reflexive British education and inculcating anointed leaders with the rigours of public accountability and transparency is a wonderful and deeply subversive thing to do (irrespective of the fee accepted). If – and only if – accepting the money required a compromise in the academic integrity of the syllabus then resignation is appropriate. If academic standards were not compromised and it was still wrong to take Libyan money, then it is also wrong to take money from any number of government scholarship schemes funded by undemocratic states (including Saudi Arabia and China) that prepare their chosen future leaders for business, political and scientific leadership.”

There is clearly a broader issue here about the appropriate balance of public, private and international funding for education. But we agree that given the reality of so much external funding, the main issue with funding is whether it impedes academic freedom. When “strings” are attached to funding the ethical problem is one of misusing power to distort knowledge. With “no strings attached” arrangements, this moves to a more vague “complicity” with undesirable people or organizations or being associated with “dirty money”. Not that these are inconsequential considerations. But there is certainly a good case that can be made for using “bad” money for “good” ends – as critics of Microsoft’s monopolizing tactics might recognize in the Bill and Melinda Gates Foundation, for example. In the case of LSE, there is no evidence as yet of any such strings – but maybe Davies' prompt resignation could hint at further skeletons in the closet. Time will tell.

Ultimately though, universities should be (but are not) better prepared for the risks associated with their funding arrangements, especially in the UK where a great deal of controversy is attached to funding sources in higher education (a subject that barely raises a peep in North America). We should know, having both worked in a CSR centre initially funded with tobacco industry money (which understandably caused a storm) and now occupying chairs named in honor of a company featuring no less than two disgraced CEOs (HP), and a business man who among his many accomplishments was responsible for bringing the renowned animal lovers KFC to Canada (George Gardiner) – neither of which has raised a murmur.

When we joined the BAT-funded International Centre for Corporate Social Responsibility at Nottingham University in 2002 we quickly joined Jeremy Moon, the Director, in establishing a governance structure and a funding policy that ensured academic independence and scholarly freedom along with clear lines of decision making and reporting. LSE, by comparison is now nearly 10 years later only just talking about a developing guidelines for donations as part of an independent inquiry into the Libyan affair. Perhaps it would also be wise to belatedly start tackling the issue of plagiarism more concertedly. Davies was unlucky to take the fall for an unexpected series of events in the Middle East. But he only has himself to blame for not instituting the systems and structures necessary to deal with the problems effectively in the first place.

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Andrew Crane [L] and Dirk Matten [R]

Welcome to the Crane and Matten blog - for informed commentary and expert analysis on the everchanging world of corporate responsibility.

We are two business school professors best known for our books and research articles on business ethics and corporate citizenship. We wrote the Crane and Matten blog from 2008-2015, offering unique insight on a range of issues from across the globe.

Andrew Craneis Professor of Business and Society in the School of Management, University of Bath.

Dirk Matten is the Hewlett Packard Chair in Corporate Social Responsibility in the Schulich School of Business, York University.